Project Merlin lending £2.2bn below target

New figures reveals banks are likely to fail first government tests

Project Merlin, the government’s flagship initiative to increase small business lending, is set to miss its first set of targets, according to preliminary figures.

Data compiled for the Bank of England show that Britain’s banks lent around £16.8bn to small companies during the first quarter of the 2011 Merlin agreement – £2.2bn lower than the agreed target.

The statistics also reveal that while overall business lending reached £47.2bn in the first quarter of the Merlin programme – closer to the target figure, lending is still around £300m short.

The chancellor George Osborne first launched Merlin in February of this year, following protracted negotiations with the major banks. The arrangement has remained a key topic of debate since then, with many commentators claiming it does not provide a workable solution to the bank lending problem.

Although Britain’s banks have so far declined to comment on the figures, the Treasury has moved to defend them, telling City AM it is “encouraging that the banks are broadly on track” to meet their targets.

The Treasury spokesperson also admitted that, while it would be “disappointing” for the banks to fall behind schedule in the Merlin programme, “it is still early days.”